aselsan elektronİk · 2020. 10. 27. · aselsan elektronik sanayi ve ticaret anonim Şirketi ep...

ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES REPORT OF THE BOARD OF DIRECTORS FOR THE PERIOD BETWEEN 1 JANUARY – 30 SEPTEMBER 2020

Content Page Number

1. Principles of Preparation ........................................................................................................................ 1

2. Company Information and Organizational Structure .............................................................................. 1

3. The Company’s Shareholder Structure ................................................................................................... 3

a. Members of the Board of Directors and Senior Executives............................................................. 4

b. Information on Business Partnerships, Associates, Subsidiaries, Joint Ventures and Branches ...... 7

4. Main Factors That Affect the Performance, Investment and Dividend Policy of the Company ............... 9

5. Enterprise Risk Management ............................................................................................................... 11

a. Main Risk Categories .................................................................................................................... 11

b. Early Detection and Management of Risk Committee Works ......................................................... 12

6. Financial Information of the Company ................................................................................................. 12

a. Financial Resources of the Company ............................................................................................ 13

b. Research and Development Activities .......................................................................................... 13

c. Progress in Investments and Degree of Incentive Utilization .......................................................... 14

i. Investments ................................................................................................................................. 14

ii. Incentives..................................................................................................................................... 14

d. Revenue ....................................................................................................................................... 16

e. Financial Ratios ............................................................................................................................ 16

7. Changes in the Legislation Which Would Have Significant Impact on the Activities of the Company ... 16

8. Compliance Report on Corporate Governance Principles ..................................................................... 17

9. Information Regarding the Lawsuits of the Group ............................................................................... 17

10. Information Regarding the Transactions Made within the Reporting Period ........................................ 17

a. Changes in the Articles of Association .......................................................................................... 17

b. Collective Agreement Implementations, Rights and Benefits Provided to the Personnel and Workers ....................................................................................................................................... 17

c. If it is an affiliate company, the legal transactions carried out in favor of the parent company or its affiliate with the parent company, with an affiliate company connected to the parent company with the direction of the parent company and all other measures taken or avoided to be taken in favor of the parent company or its affiliate in the previous activity year ................... 17

d. If it is an affiliate company, whether any counter performance was realized for each legal transaction according to the known status and conditions at the time the legal transaction mentioned in article iii was realized or at the time the measures were taken or avoided to be taken and whether the company incurred losses due to the taken or avoided measure and if the company incurred losses to observe whether this was equalized or not ...................................... 18

e. Information Regarding the Donations and Social Responsibility .................................................. 18

11. Events After the Reporting Period ........................................................................................................ 18

INTERIM REPORT OF THE BOARD OF DIRECTORS FOR THE PERIOD BETWEEN 1 JANUARY – 30 SEPTEMBER 2020

1

1. Principles of Preparation

The interim report of the Board of Directors is prepared on the basis of Communiqué Series II, No: 14.1 “Principles of Financial Reporting in Capital Markets” dated 13 June 2013.

The report comprises the events took place during the period 1 January – 30 September 2020. The title of the main shareholder in the report is ASELSAN Elektronik Sanayi ve Ticaret A.Ş and will be referred as “the Company” in the accompanying notes.

The Company’s consolidated subsidiaries are ASELSAN Baku (“ASELSAN Baku”), Mikroelektronik Ar-Ge Tasarım ve Ticaret Ltd. Co. (“Mikro AR-GE”), ASELSANNET Elektronik ve Haberleşme Sistemleri Sanayi Ticaret İnşaat ve Taahhüt Ltd. Co. (“ASELSANNET”), ASELSAN Malaysia Sdn. Bhd. (“ASELSAN Malaysia”), ASELSAN Konya Silah Sistemleri Anonim Şirketi (“ASELSAN Konya”), BITES Savunma Havacılık ve Uzay Teknolojileri Yazılım A.Ş. (“BITES”), ASELSAN Global A.Ş. (“GLOBAL”), ULAK Haberleşme A.Ş. (“ULAK”) and ASELSAN Ukraine LLC (“ASELSAN Ukraine”). Three branch offices; Aselsan Elektronik Sanayi ve Ticaret Anonim Şirketi EP Co. (‘’ASELSAN South Africa’’), ASELSAN Makedonya Corridor-10 Highway Toll Collection System Project (‘’ASELSAN Macedonia’’) and ASELSAN Kıbrıs İleri Teknolojiler Araştırma Merkezi (“ASELSAN Cyprus”) located in South Africa, Macedonia and Turkish Republic of Northern Cyprus (“TRNC") , respectively.

They are collectively referred as the “Group” in the accompanying notes.

2. Company Information and Organizational Structure

The Company is a leading defense industry establishment developing advanced technology system solutions within land, air, naval and aerospace platforms.

The Company, being an establishment of Turkish Armed Forces Foundation (“TSKGV”), stands in a position of a technology center within the fields of design, development, manufacturing, system integration, modernization and after sales services of military and civil communication systems, avionics systems, electronic warfare and intelligence systems, radar systems, command and control systems, naval warfare systems, security systems, transportation systems, energy systems, traffic and automation systems, medical systems, electro-optic systems and products.

The Company has been restructured under five Vice Presidencies that will carry the production and engineering tasks, which are; Communication and Information Technologies (“HBT”), Microelectronics, Guidance and Electro-Optics (“MGEO”), Defense Systems Technologies (“SST”), Radar, Electronic Warfare and Intelligence Systems (“REHİS”) and Transportation, Security, Energy, Automation and Medical Systems (“UGES”).

In order for General Management to fulfill planning at strategic level, pursuing and assessing functions in a more efficient way, four different Vice Presidencies have been constituted as Financial Management Vice Presidency, Corporate Management Vice Presidency, Technology and Strategy Vice Presidency and Business Development and Marketing Vice Presidency; in addition to these Vice Presidencies there are also Legal Affairs and Office Of The Private Secretary.

The Internal Audit Department and Board of Directors Planning and Coordination Management have been established under the Board of Directors.

The Company maintains production and engineering operations in Ankara, Macunköy, Akyurt and Gölbaşı campuses and engineering operations in METU Teknokent, Hacettepe Teknokent, Teknopark Ankara and Teknopark İstanbul. General Management is located in Ankara Macunköy campuse.


2

Rankings of Company’s international, nation-wide, sectorial rating systems are shown below;

Corporation Research / Study Related Period

Ranking

Current Prior

International Rankings

Defense News Magazine Defense News Top 100 2020 48 52

SIPRI SIPRI Top 100 2019 54 62

European Commission Industrial R&D Investment Scoreboard Top 2500

2019 1.356 1.111

National Rankings

Istanbul Chamber of Industry ICI 500 Top Industrial Entreprises 2020 11 15

ICI 500 - Private Entreprises 2020 11 15

Fortune Magazine Top 500 Companies 2020 25 32

Capital Magazine Top 500 Private Companies 2020 35 42

BIST (Borsa Istanbul)

Sustainability Index 2020 No Ranking

Corporate Management Index 2020 No Ranking

BIST Top 30 Index 2020 No Ranking

BIST Top 30 Market Value Ranking 2020 1 12

TEA (Turkish Exporters Assembly)

Top 1000 Exporters 2020 81 108

Turkish Time Journal Research and Development Expenditures Turkey Top 100

2020 2 1

Deloitte Technology Fast 50 / Big Star Category 2019 No Ranking

Brand Finance Most Valuable Firms (100 Brands) 2019 30 33

Bloomberg Businessweek Top 50 Firms (Between Universities) 2020 5 7

Universum Ideal Employers (Engineering and IT)- 100 Companies)

2020 1 1

CDP (Carbon Disclosure Project)

Climate Change Ranking (Turkey) 2020 Our Company is among the first 5 companies in “CDP

Turkey Leaders”


3

Commercial title and trade registration number of the company and contact information pertaining to its headquarters, branches and its website addresses are shown below;

Company Type Country/City

Trade Register

No Address Telephone/Fax Web site

ASELSAN Elektronik Sanayi ve Ticaret A.Ş.

Headquarters Turkey

/Ankara 31177

Mehmet Akif Ersoy Mahallesi 296. Cad. No:16 06200 Yenimahalle/Ankara

Tel: +90 (312) 592 1000 Fax: +90 (312) 354 1302

www.aselsan.com.tr

ASELSAN South Africa Branch

Branch

Republic of South Africa/

Pretoria

--

Building 4, Room 005 CSIR Campus, Meiring Naude Drive, Pretoria Gauteng, 0001, South Africa

Tel: +27 (0) 12 349 2613 Fax: +27 (0) 12 349 2544

--

ASELSAN Macedonia Branch

Branch Macedonia/

Skopje --

Ankarska 29A, 1000 Skopje/Macedonia

-- --

ASELSAN Cyprus Advanced Technology Research Center

Branch TRNC/ Güzelyurt

--

Orta Doğu Teknik Üniversitesi Kuzey Kıbrıs Kampüsü ODTÜ KALTEV AR-GE Binası No: E-19 99738 Kalkanlı/Güzelyurt/Turkish Republic of Northern Cyprus

-- www.aselsan.com.tr

3. The Company’s Shareholder Structure

Registered capital ceiling of the Company is TL 2.000.000.000 (TL two billion). The nominal capital of the Company is TL 2.280.000.000 (TL two billion, two hundred and eighty million) and is divided into 2.280.000.000 (two billion, two hundred and eighty million) shares, each having a nominal value of 1 TL.

1.210.909.090 (one billion, two hundred and ten million, nine hundred and nine thousand and ninety) of the shares are Group A shares and 1.069.090.910 (one billion, sixty nine million, ninety thousand and nine hundred and ten) of the shares are Group B Shares. All shares are in the name of the holder.

Group A shares are nominative preferred shares and 6 of the Members of the Board of Directors are elected among the Group A preferred shareholders or among the candidates presented by them.

In the accounting period, in line with the resolution of the Ordinary General Assembly of the Company, dated 19.06.2020, regarding the distribution of %100 shares of the Company’s issued capital in the form of non-paid up shares to shareholders as dividend, it was resolved that the issued Capital of the Company shall be increased from TL 1.140.000.000 to TL 2.280.000.000

http://www.aselsan.com.tr/



4

After the capital increase, updated share distrubition table of the Shareholders is presented as below.

Partners Share

(%) 30 September 2020

(TL Thousand) Share

(%) 31 December 2019

(TL Thousand)

Turkish Armed Forces Foundation (TSKGV) 74,20 1.691.652 74,20 845.826

Quoted on BIST (Free float) 25,80 588.348 25,80 294.174

Paid-in capital 100 2.280.000 100 1.140.000

Inflation adjusted capital -- 2.378.621 -- 1.238.621

a. Members of the Board of Directors and Senior Executives

Within the framework of the provisions of the Company's Articles of Association, the Board of Directors consists of total 9 members comprising of 6 members to be elected from privileged shareholders or candidates nominated by group A and 3 independent members to be elected under Capital Markets Board (CMB) regulations.


5

Information regarding the Members of the Board of Directors and Senior Executives as of publishing date of the report are as follows:

MEMBERS OF THE BOARD OF DIRECTORS and SENIOR EXECUTIVES

List

No Name and Surname Position Positions In Other Company’s Date of First Assignment

1. Haluk GÖRGÜN Chairman of the Board/

Executive Director/CEO

Member of the Board of Directors of IGG ASELSAN Integrated Systems LLC,

Member of the Board of Directors of SASAD, Vice Chairman of the Board of

Directors of Saudi Arabian Defense and Electronics Company LLC, Member

of the Board of Directors of BARQ

15 March 2017

2. Celal Sami TÜFEKCİ Deputy Chairman of the Board/

Executive Director

Vice President at Presidency of Defence Industries, Chairman of the Board

of Directors of ULAK A.Ş., Chairman of the Board of Directors of TEKNOHAB

Teknoloji Geliştirme Bölgesi Yönetici A.Ş., Chairman of the Board of Ankara

Aerospace Industrial Zone, Member of the Board of Directors of METU

MEMS

2 April 2018

3. Ercümend ARVAS Independent Member Professor at İstanbul Medipol University Electrical Engineering Department 31 March 2016

4. Yavuz ÇELİK Member -- 19 June 2020

5. Turan EROL Independent Member Professor at İstanbul Sabahattin Zaim University Business and Management

Sciences Faculty 19 June 2020

6. Mehmet Fatih KACIR Member

Deputy Minister of Republic of Turkey Ministry of Industry and Technology,

Member of Board of Trustees of Turkey Technology Team Foundation,

Member of the Board of Directors of E-Sports Federation, Member of the

Board of Directors Prof. Dr. Fuat Sezgin Islamic Science History Research

Foundation

26 April 2019

7. Alpaslan KAVAKLIOĞLU Member Deputy Minister of Ministry of Defense, Member of the Board of Directors

of Turkish Parliamentarians Union 26 April 2019

8. Salih KUL Member -- 26 April 2019

9. İbrahim ÖZKOL Independent Member

Professor at İstanbul Technical University Department of Aeronautical

Engineering, ARC Center Director, Founder Manager of İTÜ Aviation

Institute

15 March 2017

10. Mehmet Fatih GÜÇLÜ Vice General Manager

(Financial Managemet)

Member of the Board of Directors of Saudi Arabian Defense and Electronics

Company LLC, Member of the Board of Directors of Bites Savunma Havacilik

Ve Uzay Teknolojileri Yazilim Elektronik Ticaret A.Ş.

1 October 2019

11. Bayram GENÇCAN Vice General Manager

(HBT Sector President) -- 15 March 2017

12. Sezai ELAGÖZ Vice General Manager

(MGEO Sector President)

ASELSAN Middle East Psc Ltd Vice Chairman, Member of the Board of

Directors of ASELSAN Bilkent Mikro Nano A.Ş., Chairman of Board of

Directors of ASELSAN Hassas Optik A.Ş., Member of the Board of Directors

of TÜBİTAK R&D Support and Process Management Services Group,

Member of the Board of Directors Tüyar A.Ş. (Yital A.Ş.)

18 July 2018

13. Mustafa KAVAL Vice General Manager

(SST Sector President)

Vice President of the Board of Directors of IGG ASELSAN Integrated Systems

LLC, Member of the Board of Directors of Kazakhstan ASELSAN Engineering

LLP, Member of the Board of Directors of Defence and Aerospace Ministry

Exporters' Association, Chairman of the Board of the Directors of ASELSAN

Konya Silah Sistemleri A.Ş.,Member of the Board of Directors of BARQ

1 September 2014

14. Oğuz ŞENER Vice General Manager

(REHİS Sector President)

Vice Chairman of ASELSAN Bilkent Mikro Nano A.Ş., Chairman of the Board

of Managers of Mikroelektronik 1 September 2014

15. Mehmet ÇELİK Vice General Manager

(Technology & Strategy Management)

Member of CoHe, Teaching Professor in KTO Karatay University Mechanical

Engineering Department, Member of Presidency of Science, Technology and

Innovation Technology Policy Board, Member of the Board of the Directors

of ASELSAN Konya Silah Sistemleri A.Ş., Chairman of the Board of Directors

of TR Eğitim ve Teknoloji A.Ş.

14 May 2017

16. İbrahim BEKAR Vice General Manager

(UGES Sector President)

Member of the Board of Managers of Aselsannet, Member of the Board of

Directors of ASELSAN Hassas Optik A.Ş., Advisory Board Member of Özyeğin

University Mechanical Engineering Department, Advisory Board Member of

Medipol University Faculty of Engineering and Natural Sciences Department

of Biomedical Engineering,Member of Technology Advisory Commission of

Information Valley

12 February 2018

17. Hakan KARATAŞ Vice General Manager

(Corporate Management)

Associate Professor in UAK, Member of the Board of Directors of Teknohab

Teknoloji Geliştirme Bölgesi Yönetici A.Ş. 2 July 2018

18. Osman Devrim FİDANCI

Vice General Manager

(Business Development and

Marketing)

Chairman of the Board of Directors of ASELSAN Global Diş Ticaret ve

Pazarlama A.Ş., Vice Chairman of the Board of Directors Of ULAK A.Ş.,

Member of the Board of Directors of ASELSAN Middle East Psc Ltd,Institute

of Electrical and Electronics Engineers (IEEE), Association of Record for Bid,

Proposal, Business Development, Capture and Graphics Professionals

(Apmp)

1 February 2019

19. Abdülkadir GÖKTAŞ Internal Audit President -- 1 September 2014


6

The Members of the Board of Directors are entitled with the authorizations stipulated in the Turkish Code of Commerce (“TCC”) and in article 13 of the Articles of Association of the Company.

Entitled shareholders, members of the board of directors, senior executives and to their spouses as well as relatives up to second degree are not authorized to perform transactions which may cause conflict of interest or competition with the Company and/or subsidiaries.There is not any ban on trading for board members with the Company, which they performed on their own or on behalf of a third party. There is no operation regarding the non-compete obligation by the members of the board.

The controls are carried out by the Internal Audit Presidency (“IAP”) and Audit Committee within the parent company in order to minimize the substantial error risk on the financial statements of the Group. IAP and Audit Committee carry out their duties independent from each other but within the guidance of common objectives and targets, with the aim of maintaining an internal control system, which provides required controls in matters such as the reliability of the financial reporting system, the efficiency of the activities in order to eliminate the operational risks and compliance with the law. Furthermore, the efficiency and sufficiency of the internal control are supported with the directives in effect.

Total Amount of the Financial Benefits Given To Senior Executives:

The total amount of the remuneration and similar benefits paid to the senior executives by the Company as for the period that ended on 30 September 2020 is TL 18.703 Thousand.

Total amount of domestic and foreign allowances, travel, accommodation and representation expenses and financial benefits in kind and total amounts of insurances granted to the senior executives and members of the Board of Directors of the Group for the period ended by 30 September 2020 is TL 278 Thousand.


7

b. Information on Business Partnerships, Associates, Subsidiaries, Joint Ventures and Branches

The Company’s consolidated subsidiaries are ASELSAN Baku (“ASELSAN Baku”), Mikroelektronik Ar-Ge Tasarım ve Ticaret Ltd. Co. (“Mikro AR-GE”), ASELSANNET Elektronik ve Haberleşme Sistemleri Sanayi Ticaret İnşaat ve Taahhüt Ltd. Co. (“ASELSANNET”), ASELSAN Malaysia Sdn. Bhd. (“ASELSAN Malaysia”), Aselsan Konya Silah Sistemleri Anonim Şirketi (“ASELSAN Konya”), BITES Savunma Havacılık ve Uzay Teknolojileri Yazılım A.Ş. (“BITES”), ASELSAN Global A.Ş. (“GLOBAL”), ULAK Haberleşme A.Ş. (“ULAK”), ASELSAN Ukraine LLC. (“ASELSAN Ukraine”) and Macedonia, South Africa and Turkish Republic of Northern Cyprus branches.

The Company has three branch offices; Aselsan Elektronik Sanayi ve Ticaret Anonim Şirketi EP Co. (‘’ASELSAN South Africa’’) located in South Africa, ASELSAN Makedonya Corridor-10 Highway Toll Collection System Project (‘’ASELSAN Macedonia’’) located in Macedonia and ASELSAN Kıbrıs İleri Teknolojiler Araştırma Merkezi (“ASELSAN Kıbrıs”) and Turkish Republic of Northern Cyprus (“TRNC") located in Cyprus, respectively. The branches are included in the consolidated financial statements.

Subsidiaries Main Activitiy Share

(%)

ASELSANNET Communication systems 100

ASELSAN Baku Marketing and sales of the group products 100

ASELSAN Global Export 100

ASELSAN Malaysia Remote controlled weapon systems 100

ASELSAN Ukraine Marketing and sales of the group products 100

Mikro AR-GE Microelectronics R&D projects 85

ASELSAN Konya Weapon and weapon systems 51

BİTES Defence, civil aviation, space technologies, softwares

51

ULAK Communication systems 51

ASELSAN Hassas Optik Sanayi ve Ticaret A.Ş. (“ASELSAN Optik”), ASELSAN Bilkent Mikro Nano Teknolojileri Sanayi ve Ticaret A.Ş. (“ASELSAN Bilkent”), IGG ASELSAN Integrated Systems LLC (“IGG ASELSAN”), Kazakhstan ASELSAN Engineering LLP (“ASELSAN Kazakhstan”), ASELSAN Middle East PSC LTD (“ASELSAN Jordan”), Saudi Arabian Defense Electronics Corporation LLC (“SADEC LLC”), BARQ QSTP LLC firması (“BARQ QSTP LLC”), TÜYAR Mikroelektronik Sanayi ve Ticaret A.Ş. (“TÜYAR A.Ş.”), Teknohab Teknoloji Geliştirme Bölgesi Yönetici A.Ş. (“TEKNOHAB”), EHSİM Elektronik Harp Sistemleri Müh. Tic. A.Ş.(“EHSİM”), TR Eğitim ve Teknolojileri A.Ş. (“TR Eğitim”) and Dasal Havacılık Teknolojileri A.Ş. (“DASAL”) are consolidated by the equity method.


8

The business partnerships and affiliates of the Group recorded as financial investments and investments valued by equity method, with their participation ratios and amounts are as follows;

Company Main Activity Area Share (%)

30 September 2020 Group Share of Net

Assets (TL Thousand)

ROKETSAN – Roket Sanayi ve Ticaret A.Ş.

All kinds of missiles, rockets, guided ammunition and their launch systems and propulsion systems and rocket fuels, guidance and control systems, algorithms and softwares related to these systems, warheads and other parts of these systems, all kinds of plugs and all kinds of ballistic protection (armor) system

14,9 987.560

ASELSAN Kazakhstan Manufacturing, sales and technical services of electronic and electro-optical devices and systems

49 43.155

ASELSAN Jordan Marketing, sales and joint production of group products 49 21.964

ASELSAN Optik Precision optic technology 50 13.486

EHSİM Electronic Warfare and Tactical Command Systems 50 10.640

IGG ASELSAN Production, integration, sales and technical service of high technology products

49 8.964

TÜYAR A.Ş. Production of micro and nano-sized devices containing semi-conductor and similar technological materials

51 8.413

ASELSAN Bilkent Manufacturing of micro and nano-sized devices containing semiconductors and similar technological materials

50 7.364

TEKNOHAB

Creating investment opportunities in technology intensive areas, provide job opportunities to researchers and skilled people, help technology transfers and facilitate to attract foreign capital to country that will enable high technology

15 6.230

SADEC LLC Manufacturing and sales of radar, electronic warfare and electrooptic products

50 2.043

TR Eğitim ve Teknolojileri

Realizing Human Resources studies, Consultancy with respect to HR studies, accreditation services and trainings for every level, educational, cultural, art, sports, fair organizations and digital marketing operations.

35 1.225

ASPİLSAN Enerji Sanayi ve Ticaret A.Ş.

Manufacturing and sales of Ni-Cd, Ni-MH, Li-Ion battery / battery blocks and aircraft battery systems

1 904

BARQ QSTP LLC Command and control systems, thermal and night vision camera, crypto, remote-controlled weapon systems

48 834

DASAL A.Ş. Aviation technologies 40 40


9

4. Main Factors That Affect the Performance, Investment and Dividend Policy of the Company

The Company carries on its business interests mainly in defense industry as well as in non-defence industry.

According to the latest data, world defense expenditures has increased by 3,6 % reaching USD 1,9 Trillion which is the highest level in the last 31 years and the ratio of expenditures to GDP has realized as 2,2%. The summary table on the right side contains information about the top five countries which accounted for 62% of the defense expenditure in 2019 and Turkey.

As of 2019, Turkey's annual defense expenditures increased by 6% to USD 20,4 Billion and ranks 16th in the world. The ratio of defense spending to GDP tends to increase steadily over the years, and reached the highest level of 15 years with a rate of 2.7%.

Due to the industry’s nature, defense projects spread over years, furthermore a system project lasts approximately 4 to 5 years from its start to its delivery. As of 30 September 2020 long term plans which have been accordingly signed as contracts spread over years amounts to USD 9,5 Billion. The determination of target regions/countries and focusing on these markets for marketing and direct sales as well as engaging in joint productions, transfer of technology to/from international platform producers and strategic initiatives for sales to third countries are concurrent to our sustainable growth objectives. Our structure coincides with our objective to operate in non-defense electronic fields which require high technology.

The Company’s profit distribution policy is posted on www.aselsan.com.tr website under Investor Relations/ Corporate Governance/Policies. According to the policy, at least 10% of the net profit is planned to be distributed.

Resolved at the 45th Ordinary General Assembly Meeting that was held on 19.06.2020 that; of the net profit generated by our company from its activities in 2019;

- In accordance with Article 519/(1) of the Turkish Commercial Code, General Legal Reserves amounting to TL 6.383.631,38 is going to be allocated,

- Out of net distributable profit to the shareholders for the period, calculated in the framework of the dividend distribution regulations and decisions of the Capital Markets Board, gross, TL 335.000.000,- (Kuruş 9,79532 per share of TL 1 and 9,79532% on the basis of the capital) (net TL 284.750.000,- Kuruş 8,32602 per share of TL 1 and 8,32602% on the basis of the capital) shall be distributed in the form of cash and TL 1.140.000.000,- shall be distributed as non paid-up share, which equals to 100% of the capital,

- In accordance with Article 519/(2) of the Turkish Commercial Code, General Legal Reserves amounting to TL 27.800.000,- is going to be allocated,

- The remaining profit is going to be allocated as Extraordinary Legal Reserves,

and distribution of the cash dividends to the shareholders are to be distributed as of July 17, 2020, October 16, 2020, and December 18, 2020 in 3 equal installments and the non paid-up share is to be distributed following the completion of the legal process.

The first installment payment of the dividends was made on 17 July 2020. Transactions regarding the profit distribution within the scope of 100% capital increase by bonus issue were completed on August 5, 2020. The issued capital has increased from TL 1.140.000.000 to TL 2.280.000.000.

Rank Country

Expenditure

(m$)

2019/18

Change

Expenditure

/ GDP

Share in the

World

World 1.917 3,6% 2,2%

1 USA 732 5,3% 3,4% 38,2%

2 China 261 5,1% 1,9% 13,6%

3 India 71 6,8% 2,4% 3,7%

4 Russia 65 4,5% 3,9% 3,4%

5 Saudi Arabia 62 -16,0% 8,0% 3,2%

16 Turkey 20 5,8% 2,7% 1,1%



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COVID - 19

From the first statements announced by the World Health Organization and Ministry of Health of Republic of Turkey regarding the Corona Virus (COVID-19) threat, ASELSAN has taken all the necessary preventive measures and decisions to protect the health of all employees working in its campuses and to provide a suitable working environment for them. Maintaining the health of all employees working in ASELSAN campuses, as well as ensuring the continuity and sustainability of production and design activities in terms of the nature of the area in which it operates and its importance for the country have been determined as the main target.

COVID-19, which has influenced the world and our country, has been at the center of ASELSAN's Corporate Risk Management System. In order to reduce the impact of the outbreak, measures covering all internal and external stakeholders at ASELSAN have been implemented. In addition, all possible effects of epidemic disease on ASELSAN's strategic goals, operations, financial situation, and all laws and regulations it is subject to were evaluated through scenario-based analysis.

ASELSAN, which is Turkey's largest defense electronics organizations operates in a wide area that meets the needs of domestic and foreign authorities especially the Turkish Armed Forces’ in the field of communication and information technologies, microelectronics, radar, electronic warfare, electro-optics, avionics systems, unmanned systems, land, naval, army systems, air defense, missile systems, command and control systems, transportation, security, traffic, automation and health technologies. ASELSAN Family continues to work with great faith, determination and sacrifice.


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5. Enterprise Risk Management

ASELSAN's Enterprise Risk Management Policy aims; to take proper actions against uncertainties that threaten the existence of the Company and to protect corporate identity and stakeholders’ interest at all conditions. Risk management is an integrated element of Corporate Management. The information gathered within the scope of risk management activities in ASELSAN is integrated into decision making mechanisms.

The “top-down” and “bottom-up” approach is being applied into Enterprise Risk Management activities together. Risks, which are significant enough to affect ASELSAN's achievement of its targets, are identified, evaluated, monitored and reported along with the risk responses and precautions to be taken. At ASELSAN; The Enterprise Risk Management process is regularly reviewed and improved. ASELSAN's employees and business processes are at the center of the Enterprise Risk Management System.

At ASELSAN, enterprise risks are followed under four main categories.

a. Main Risk Categories

Strategic Risks: Risks that may prevent ASELSAN from reaching its targets in short, medium or long terms are classified under this heading. Risks under this heading include factors such as; growth and continuity, changing customer expectations, technological changes and market share.

While ASELSAN manages its strategic risks effectively; it aims to increase its backlog, increase exports and to take part in sustainable works. In order to increase ASELSAN’s market share and offer new products / services, ASELSAN seizes company mergers / acquisition opportunities both at home and abroad. ASELSAN also conducts business development activities successfully. ASELSAN increases its research and development activities in order to meet changing customer expectations and changes in technology, and realizes the necessary infrastructure and technological investments. ASELSAN diversifies the geographical regions in sales, customer portfolio and the sectors in order to maintain its growth and continuity in the medium and long term.

Operational Risks: It is defined as the risks arising from errors and negligence that may occur while performing the operational activities of the company. Risks under this section include factors such as; production, supply chain, human resources, information technologies, natural disaster and terrorist attacks.

In order to ensure the continuity of the processes, in-house directives and functors have been prepared and necessary updates are being made when needed. Within the scope of the Internal Audit plan and work schedule prepared in ASELSAN, business processes are being audited and process improvements are made in line with the audit outputs.

Quality is not compromised in production processes involving both internal operations and suppliers; subcontractor and supplier development activities are carried on unabated. In terms of managing Human Resources and increasing employee motivation; activities were made with the participation of employees from every level and process improvements were made. Security policies are sustained at the highest level in Information Technology applications. In this area, internal and external audits are carried out periodically and precautions are taken against probable cyber-attacks and in the field of Information Technologies, business continuity in-house is provided.

Regarding risks, such as natural disasters, terrorist attacks, necessary precautions are taken, primarily insurances have been made, and drills are carried out.

Financial Risks: It refers to the risks arising from the financial structure and financial preferences of the company. Exchange rate, liquidity and interest rate risks are some risks under this heading.


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The exchange rate risk, which is any kind of change that may occur in assets and / or liabilities as a result of exchange rate fluctuations in the future, ASELSAN aims to minimize the effect of exchange rate fluctuations by keeping the long and short foreign exchange position at a minimum level. The balance sheet methods have been used in managing the exchange rate risk. Implementations such as; making use of foreign exchange denominated loans in line with the company’s export volume, matching the contract currency with the currency of the costs of the project, and signing the subcontractor contracts in line with the main contract currency are used.

ASELSAN eliminates the liquidity risk, which is known as the risk arising from default and inability to fund the the assets, it monitors forecasted and actual cash flows regularly and ensures the continuity of adequate funds and credit lines by matching the maturity of financial assets and liabilities. In order to manage the interest rate risk arising from changes in assets and / or liabilities as a result of fluctuations in interest rates in the future, it conducts transactions with fixed interest rates and uses financial derivative instruments when necessary.

Compliance Risks: It refers to the risks associated with the Company's financial losses and / or loss of reputation as a result of the company's activities or the attitudes and behaviors of the company employees that are not in compliance with the legislation, regulations and standards. While conducting its activities, ASELSAN closely follows national and international standards with the best practices in the sector, and compliance with legislation and regulations is ensured at the highest level. In addition, by Internal Audit Presidency; the effectiveness of controls, compliance with legislation and ASELSAN regulations, compliance with ethical principles and controls to eliminate risks are being evaluated.

b. Early Detection and Management of Risk Committee Works

The Early Detection and Management of Risk Committee, which consists of the members of the Board of Directors, has been operating at ASELSAN since 2012 in order to ensure early detection of risks that may endanger the existence, development and continuity of the Company, to take necessary measures related to the identified risks and to manage the risks. The Chairman of the Committee is an Independent Board Member.

Committee; carries out its own activities in full compliance with the regulations of the Capital Markets Board and all the related legislation, especially article 378 of the Turkish Commercial Code No. 6102. In addition, the Early Detection of Risk System and Committee, established by ASELSAN, is subjected to independent audits annually and the Auditor Report stating that the activities performed is sufficient, is submitted to the Board of Directors.

Committee conducted four meetings in 2020 in order to follow the works on early detection and management of risks and to make evaluations about this issue. The reports containing the works of the Committee were being submitted to the Board of Directors periodically.

6. Financial Information of the Company

The forecasts under the normal conditions regarding the Group's consolidated financial results for the 2020 year are presented below;

Financial Targets of 2020* Financial Targets 2020 (Ratio/Amount)

Consolidated Revenue Growth (TL) 40% - 50%

EBITDA Margin (Consolidated and Adjusted without Foreign Exchange Rate Differences) 20% - 22%

Consolidated Capital Expenditures TL 1.500 Million

*These expectations are based on the yearly average of USD/TL parity to be 6,18 and EURO/TL parity to be 6,98.


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a. Financial Resources of the Company

The most substantial financial resources of the Company comprise the advance and interim payments taken within the scope of the contracts signed and profits generated by the main activities.

During the period between 1 January - 30 September 2020, the cash requirements were met with the available cash, cash inflows from operations and Turkish Eximbank Export loans. During the period between 1 January - 30 September 2020, Turkish Eximbank Export loans amounting to EUR 106 Million, USD 50 Million and TL 50 Million with fixed interest rate and commercial bank loans amounting to EUR 149 Million and TL 250 Million with fixed interest rate were used.

As of 30 September 2020, there is a loan balance amounting to USD 400 Million, including USD 180 Million used from Turkish EximBank and USD 220 Million used from commercial banks.

Planned Measures To Improve the Financial Structure of the Company

As for the annual budgets and implementations for the period 2020-2022, the Group has adopted the principles as the basis to take care of savings in all kinds of expenditures, to follow up the advances and receivables closely, to pay attention to the proportion of the term and currency in purchasing and sales agreements and the risk status of the domestic/foreign suppliers and sub-contractors.

b. Research and Development Activities

The Group, as a leading defense industry establishment, develops advanced technology system solutions on land, air, naval and aerospace platforms, places great importance to Research and Development activities and technological gains since it was founded.

By following up on all kinds of technological developments pertaining to land, air, naval and aerospace platform product/system technologies, the Company not only applies technology but also designs, develops and produces product/system technologies in order to share or sell with/to national and international collaborations.

Projects are striving at maximum level in order to benefit from the technological opportunities existing in the country aiming to increase the national contribution share. For this purpose, cooperation is made with universities and various R&D organizations and importance is given to the use of local suppliers and subcontractors.

As for the projects carried out within the Group, Research and Development center application pursuant to the Law regarding the support of Research and Development activities numbered 5746 is being implemented. As for non-public R&D projects, the approval of TEYDEB (Technology and Innovation Support Programs Directorate) and ARDEB (Research Support Programs Presidency) are received and supported by the institutions.

Within the Company, there are six Research and Development centers within the scope of Defense System Technologies (SST), Radar Electronic Warfare and Intelligence Systems (REHİS), Microelectronics, Guidance and Electro-optics (MGEO), Communication and Information Technologies (HBT), Transportation, Security, Energy, Automation and Medical Systems (UGES) Vice Presidencies as well as ASELSAN Research Center of Vice Presidency of Technology and Strategy Management (GY). Currently, 4.101 staff are employed at the Group’s Research and Development centers.

The Company also carries on its activities in METU Teknokent, Hacettepe Teknokent, Teknopark Ankara and Teknopark İstanbul within the scope of the Law numbered 4691 on Technology Development Regions. Group employed 711 staff within this region.


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c. Progress in Investments and Degree of Incentive Utilization

a. Investments

Directing the Company’s resources to profitable, high value added fields, where advanced technology is used, is anticipated in the first place by considering the global tendencies, technological developments and the actual and prospective requirements of all customers, particularly Turkish Armed Forces. The investments within the Company are carried out after detailed consideration of the technological plans, strategic plans and project requirements.

During the current period, the investments, which will meet the needs of substructure and equipment in order to be used in research and development project have been sustained in compliance with the investment scheme in accordance with the policy of efficient use of resource.

b. Incentives

Income tax withholding incentive, insurance premium support, stamp tax exemption and Research and Development incentive are utilized within the scope of the Law numbered 5746. In accordance to the Law regarding the Incentive of Research and Development Activities numbered 6676 published on Official Gazettes numbered 29636 on 26 February 2016 and The Law Regarding the Amendments on Delegated Legislation, the content of the law and incentives has been broadened and additional exceptions has been given. Income tax withholding incentive, insurance premium support and stamp tax exemption is utilized by being calculated over the salaries of the Research and Development personnel and not being paid to the relevant institution and the Research and Development discount is utilized by means of applying a discount on the corporate tax return. Aforesaid law is valid until the date of 31 December 2023.

Within the scope of the Teknokent Law numbered 4691, incentive on withholding income tax, insurance premium support and stamp tax exemption is applied. These are utilized by making calculations on Research and Development and software personnel wages and not being paid to the related institution. The gain obtained with reference to the execution of Technology Development Zones Law numbered 4691 is exempted from the corporate tax of 31 December 2023.

Between the period 1 January – 30 September 2020 because of having Research and Development centers, TL 163.427 Thousand within the scope of income tax withholding incentive, promotion of insurance premium, stamp duty exception; as a result of being active at METU Teknokent, Hacettepe Teknokent, Teknopark Ankara and Teknopark Istanbul, TL 45.236 Thousand incentives have been used.

Within the scope of the Research and Development Law No 5746 and Teknokent Law No 4691, TL 275.315 Thousand Corporate Tax advantage has been gained as of 1 January - 30 September 2020 period.

At the periods when Group’s Research and Development expenses, which is subject of Research and Development discount, is higher than the principal amount of Research and Development discount which is indicated at corporate tax return, Corporate Tax ratio is 22% for the years 2018 - 2020 and 20% for the next years of distinction amount is evaluated as deferred tax income at financial tables.

Under TÜBİTAK Academic Support Programs, six 1003- Priority Areas R&D Projects and one 1004-Center of Excellence Support Programs are still in progress.

Under TÜBİTAK Public Support Program, nine R&D projects of 1007 Public Entities R&D Projects Support Program, which has the aim of meeting the needs of R&D of Public Entities and supporting of solving their problems as projects, are still in progress.


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2232 International Leader Researcher Program under TÜBİTAK bursary category has been designed for encouraging the transfer of Turkish Scientists and qualified researchers from abroad and making them continue their works in reputable academy, industry and establishments in Turkey. In 2019 one personnel is qualified under this support program and is still going on. Related to these programs incentives have been used.

In addition, there is one project carried out with in the scope of TÜBİTAK 1005 ARDEB-National New Ideas and Products Research Funding Program.

Market research, fair, and library support provided by the Support and Price Stabilization Fundy were obtained (TL 399 Thousand).

Within the context of “Taxes and Funds Exemption Certificate” received from Ministry of Trade of Republic of Turkey in order to increase exports and gain competitiveness in international markets, stamp duty and fee exemptions are used in export sales and deliveries and foreign exchange gain activities. (TL 15.851 Thousand)

Within the Decision Regarding the Governmental Grant in Investments, there are 5 Investment Incentive Certificates taken from General Directorate of Incentives and Implementation of Ministry of Industry and Technology of Republic of Turkey. With such incentive certificates, VAT exemption and customs tax exclusion are utilized (TL 15.605 Thousand).

VAT exemption is applied in domestic and foreign purchases and customs tax exemption is used in foreign purchases (TL 163.993 Thousand).

The sources, amounts and types of the incentives utilized are summarized in the table below collectively;

The Source of Incentives Type of Advantage 30 September 2020

Amount (TL Thousand)

Research and Development Incentive Law numbered 5746 and Teknopark Law numbered 4691

Corporate Income Tax 275.315

VAT Law numbered 3065 VAT Return 163.993

Research and Development Incentive Law numbered 5746

Income tax withholding, Insurance Premium, Stamp Tax 163.427

Teknopark Law numbered 4691 Income tax withholding, Insurance

Premium, Stamp Tax 45.236

Export Incentive Practices (Taxes and Funds Exemption Certificate)

Stamp Duty Exemptions 15.851

Ministry of Industry and Technology Investment Incentives

VAT and Customs Duty Exemptions

15.605

The Support and Price Stabilization Fund Cash Support 399

TUBITAK Support Programmes Cash Support 74

TOTAL 679.900


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d. Revenue

According to the relevant sales agreement terms and conditions, the Company’s revenue from projects contains order based production, mass production product sales, services, commodities and progress billing sales. Sales terms and conditions are subject to change as for the respective agreements.

Substantial part of production has been realized based on orders. All related processes are being managed efficiently since product requirements, quantities and prices are different.

Works in order to perform distinctive business development and marketing activities in global markets to increase efficiency in international markets and exports have been continued.

Revenue (TL Thousand)

30 September 2020 30 September 2019 Δ %

Domestic sales 7.892.613 6.840.306 15%

Exports 530.055 807.367 -34%

TOTAL 8.422.668 7.647.673 10%

e. Financial Ratios

As of 30 September 2020, the Group’s financial statements prepared in accordance with the Communiqué Series II, No: 14.1 “Communiqué on Capital Market Financial Reporting Standards” issued by Capital Markets Board. Based on this, financial ratios are presented as below.

Financial Ratios Consolidated Financial Position

30 September 2020 31 December 2019

Current Ratio 1,92 1,80

Liquidity Ratio 0,94 1,00

Short Term Current Liabilities / Total Financial Liabilities 62,3% 99,6%

Total Financial Liabilities / Total Assets 11,3% 8,7%

Financial Ratios Consolidated Income Statement

30 September 2020 30 September 2019

Gross Profit Margin 26,6% 24,2%

Operating Profit Margin (EBIT) 19,0% 18,2%

Adjusted EBITDA Margin (*) 21,6% 20,4%

Net Profit Margin 35,5% 25,8%

Return On Equity (ROE) 30,8% 23,9%

Net Working Capital / Net Sales 55,2% 49,9%

Return on Assets (ROA) 17,0% 12,7%

(*) General administrative expenses, marketing expenses and research and development expenses are substracted from and current period’s depreciation and amortization expenses are added to the gross profit in calculation of EBITDA value. Other operating income and other operating expenses are not included in the calculation.

7. Changes in the Legislation Which Would Have Significant Impact on the Activities of the Company

There is no change in the legislation within the reporting period.


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8. Compliance Report on Corporate Governance Principles

“Corporate Governance Compliance Report” will be announced in the year-end report of the Board of Directors.

9. Information Regarding the Lawsuits of the Group

The lawsuits and execution proceedings filed by or against the Group as of 30 September 2020 are summarized below;

Description 30 September 2020

(TL Thousand)

Ongoing lawsuits filed by the Group 110.157

Execution proceedings carried on by the Group 264.017

Lawsuits proceedings carried against the Group 27.405

Execution proceedings carried against the Group 2.571

Lawsuits finalized in favor of the Group within the period 1.348

Lawsuits finalized against the Group within the period 2.909

There has not been any final judicial decision against the Group due to the violation of employee rights or the responsibility related with work accidents within 2020.

10. Information Regarding the Transactions Made within the Reporting Period

a. Changes in the Articles of Association

Within the scope of the dividend distribution of the Company in 2019, the issue of increasing the capital from TL 1.140.000.000 to TL 2.280.000.000 and amending the 6th article of our Company's Articles of Association was registered by Ankara Chamber of Commerce on 27.07.2020.

b. Collective Agreement Implementations, Rights and Benefits Provided to the Personnel and Workers

The Group recruited a total number of 1.370 people (17 with fixed-term contract) as the personnel including fixed-term contracted personnel, disabled and terror-stricken personnel during the period 1 January - 30 September 2020 and the number of people quit for the same period is 259 (10 with fixed- term contracted).

The rights and benefits provided to the personnel by the Company are bonus payments, meal allowances, marriage benefits, maternity benefits, death allowances, transportation, private health insurance, and childcare and kindergarten benefits. The average number of personnel employed by the Group as of 30 September 2020 is 8.462.

c. If it is an affiliate company, the legal transactions carried out in favor of the parent company or its affiliate with the parent company, with an affiliate company connected to the parent company with the direction of the parent company and all other measures taken or avoided to be taken in favor of the parent company or its affiliate in the previous activity year

There has not been such an event within the reporting period.


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d. If it is an affiliate company, whether any counter performance was realized for each legal transaction according to the known status and conditions at the time the legal transaction mentioned in article iii was realized or at the time the measures were taken or avoided to be taken and whether the company incurred losses due to the taken or avoided measure and if the company incurred losses to observe whether this was equalized or not

There has not been any material event that affects the Company’s financial statements within the period.

e. Information Regarding the Donations and Social Responsibility

Within the period of 1 January - 30 September 2020, the donations made by the Group are as below.

Foundation 1 January - 30 September

2020 (TL Thousand)

Kara Kuvvetleri Komutanlığı (Turkish Land Forces) 3.150

Jandarma Genel Komutanlığı (Gendarme General Command) 2.919

Biz Bize Yeteriz Türkiyem Campaign 1.500

ASİL Derneği (ASİL Foundation) 476

Sivas Cumhuriyet University 298

Ankara Science High School 14

TOTAL 8.357

11. Events After the Reporting Period

After the reporting period, the Group has signed contracts amounting to USD 52 Million.

ASELSAN ELEKTRONIK SANAYI VE TICARET A.Ş. SIGNATURE SECTION OF ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR THE PERIOD

BETWEEN 1 JANUARY – 30 SEPTEMBER 2020

Prof. Dr. Haluk GÖRGÜN Chairman of the Board of

Directors and CEO

Dr. Celal Sami TÜFEKCİ

Vice Chairman of the Board of Directors

Prof. Dr. Ercümend ARVAS Member of the Board of

Directors

Yavuz ÇELİK Member of the Board of

Directors

Prof. Dr. Turan EROL Member of the Board of Directors

Mehmet Fatih KACIR Member of the Board of

Directors

Alpaslan KAVAKLIOĞLU Member of the Board of

Directors

Salih KUL Member of the Board of

Directors

Prof. Dr. İbrahim ÖZKOL Member of the Board of

Directors

aselsan elektronİk · 2020. 10. 27. · aselsan elektronik sanayi ve ticaret anonim Şirketi ep...

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